FACES
Filipino American Civic Employees of Seattle
BALLOT
VOTE BY MARCH 21, 2008
Should FACES convert its tax status from 501c-4 to
501c-3 to allow for donations to be tax deductible?
____ YES. Convert FACES to 501c3 tax status.
____ NO. Retain FACES 501c4 tax status.
Signature__________________________ Print Name______________________
Date_____________
How to submit your ballot?
• Bring this ballot with you to the March 18th FACES General Membership meeting, or
• Send by email to: Linda.timmen@seattle.gov, or
• Mail to: FACES, Attn: Linda Timmens, P.O. Box 21831, Seattle, WA 98111
If you have questions, contact Linda Timmen, Bylaws Chair, at 684-8097.
Frequently Asked Questions
about 501(c) (3) and 501(c) (4) organizations
Prepared by Andrew Ygona and Nolan Lim
1. What is a 501(c) (3) non-profit corporation?
A 501 (c) (3) is a non-profit charitable, educational, or corporation. Section 501(c) (3) is
a tax law provision granting exemption from the federal income tax to non-profit
organizations. This exemption does not cover other federal taxes such as employment
taxes. Thus, any non-profit organization who obtains a 501(c) (3) does not have to pay
taxes on income earned. Further, third parties can donate money to 501(c) (3)
organizations and write off their donation amounts on their own income tax returns.
2. What is the current tax status of FACES?
FACES is currently a 501(c) (4) non-profit organization that is exempt from federal
taxes. 501(c) (4)’s are generally social welfare organizations, local associations of
employees, the membership of which is limited to the employees of a designated
person or persons in a particular municipality, and the net earnings of which are
devoted exclusively to charitable, educational, or recreational purposes. [1] 501(c) (4)
organizations differ from 501(c)(3) in that they are permitted to participate in political
campaigns, and lobby for more for legislation.
3. What are the differences between a 501(c) (3) and a 501(c) (4)?
501(c) (3) and 501(c) (4) organizations differ in two important respects listed below.
a. Charitable contributions - First, a 501(c) (3) organization allows a third party
organization to deduct any donation given to the 501(c) (3) organization. A
501(c) (4) organization, however, does not allow third party organization to
deduct their donation amounts from their income taxes. Thus, a 501(c) (3)
gives a third party organization a greater incentive to donate to a 501(c) (3)
versus a 501(c) (4).
b. Political and Legislative Activity –
i. Political activity
Under the Internal Revenue Code, all sections of 501(c)(3) organizations are
absolutely prohibited from directly or indirectly participating in, or intervening in,
any political campaign on behalf of (or in opposition to) any candidate for elective
public office. A contribution to political campaign funds or public statements of
position (verbal or written) made on behalf of the organization in favor of or in
opposition to any candidate for public office clearly violates the prohibition
against political campaign activity. Violation of this prohibition may result in
denial or revocation of tax-exempt status and the imposition of certain excise
tax.
Under the IRC, all section 501(c) (4) organizations can participate in political
activity that is described above. The income used for political activity, however,
can be taxed.
ii. Legislative Activity (lobbying)
In general, no organization may qualify for section 501(c) (3) status if a
substantial part of its activities is attempting to influence legislation (commonly
known as lobbying). A 501(c) (3) organization may engage in some lobbying, but
too much lobbying activity risks loss of tax-exempt status.
501 (c) (4) organizations do not have a limit on legislative activity so long as the
activity furthers the purpose of the organization.
4. Why does FACES want to convert to a 501(c)(3) organization?
The 501(c) (3) status would allow FACES to attract donors (individual, non-profit
foundations and corporations) to donate more dollars to FACES by having their
respectable donations be tax deductible.
5. What would be the benefit of maintaining a 501(c) (4) status?
The main benefit of maintaining 501(c) (4) status is that FACES could participate in
political campaigns and/or endorse particular political candidates. Based on past
practices of FACES, however, we have not recently participated in political activities and
therefore have no need to maintain 501(c) (4) status.
Note that FACES will be able to influence legislative decisions through education and
expression of concerns. Also, there is an opportunity to work with an organization
called FAPAGOW (Filipino American Political Action Group of Washington) that works
on electoral politics and conducts lobbying activities.
6. What are the costs to changing FACES status?
The fee is minimal. Currently, the fee is dependent on the FACES anticipated
revenues.
Footnote
^ See 26 U.S.C.§ 501(c)(4)(A).
1. http://www.irs.gov/pub/irs-pdf/p557.pdf